Legislation that set the stage for Purdue’s dive into online higher ed also exempts 'New U' from state's open meetings, public records laws. That, Purdue says, was part of the deal.

WEST LAFAYETTE, Ind. – When Purdue University trustees last week unfurled the first details about how it planned to acquire Kaplan University, a for-profit leader in online education, and convert it into a new branch of the land-grant university, timing wasn’t coincidental.

That same Thursday, Gov. Eric Holcomb was scheduled to sign House Bill 1001, the state’s next two-year budget, into law. Tucked 170 pages deep in a 188-page budget, language quietly ushered in during the closing days of the General Assembly session gave Purdue clearance to take on Kaplan after five months of top-secret negotiations.

That morning, Purdue President Mitch Daniels declared that Kaplan “is now a public university.”

But in legislation Purdue helped craft and put into hands of legislators, the “New U” is exempt from Indiana open door laws, access to public records laws and accounting for public funds codes – each on the books to offer basic public scrutiny that governs the state’s governmental bodies and universities, including Purdue.

“I wasn’t aware of it and haven’t seen anything like it for other state agencies or even quasi-state agencies,” said Luke Britt, who as Indiana’s public access counselor helps arbitrate what is and isn’t covered by open door and open records laws.

“I’d need to look at it more, honestly,” Britt said. “At first appearances, it looks like they have an out from public access.”

Steve Schultz, Purdue’s legal counsel, said the exemptions were put into the bill intentionally to be clear that the new online university will be a different animal that Purdue and its regional campuses.

First, Schultz said, it won’t receive state money. And second, the New U will operate more like a nonprofit corporation and will not, he said, “meet the definition of a ‘public agency’” under state open records or open meetings laws.

“By design,” Schultz said, “it will be autonomous, be separately funded, have separate and distinct operations, and have the ability to remain nimble and innovate in the sector it serves.”

According to the deal signed last week by Purdue’s trustees and officials from Graham Holdings, Kaplan University’s parent company, Kaplan will continue to offer courses in its certificate and degree programs at current pricing, but under a yet-to-be-determined, Purdue-branded name. Kaplan has 32,000 students, 2,462 faculty members and 15 campuses.

The deal still needs approval by the Commission for Higher Education and other oversight agencies. But Purdue touted that the rebranded Kaplan would be self-sustaining and would need no state money, as it extended the university’s public, land-grant obligations to teach a new sort of student.

How the New U would evolve, what it would be called and how existing Purdue programs could jump in and take advantage of Kaplan’s online infrastructure and reach is, as Daniels said Thursday, “all TBD.”

Setting the stage was the state law Purdue wrote, local legislators inserted and Holcomb signed.

State Sen. Brandt Hershman, a Buck Creek Republican and the GOP majority floor leader in the Indiana Senate, said he knew the general outline of what Purdue was looking to do with Kaplan about a month ago.

While parties at Purdue and Kaplan were bound by non-disclosure agreements once negotiations started in November, Hershman said he had no such restrictions when he agreed to insert the Purdue provisions into the budget bill in the closing days of a session that ended April 21. (Schultz said Purdue asked lawmakers “to maintain confidentiality to the extent possible.”)

Hershman said he thought the partnership was a fascinating idea that put Purdue in position to jump past competition in higher education’s emerging online presence.

Hershman said he was convinced that questions being asked now on campus – “the kind you and I would ask, in terms of being inquisitive about liability and what this means about the Purdue brand and what kinds of opportunities it opens up,” he said – were questions Purdue was asking, too.

“I worked with Mitch Daniels on a number of innovative ideas over the years,” Hershman said. “I really didn’t have a concern. This was something that Purdue was doing an extraordinary amount of due diligence on to ensure that any deal was in the best interest of Purdue and the state of Indiana.”

The timing of the language Hershman handed to senior budget makers in the closing days meant it didn’t get a debate before budget committees in the House or Senate. Senate Appropriations Chairman Luke Kenley told Indianapolis Business Journal reporter Hayleigh Colombo that he was “pretty comfortable” putting the legislation in the budget because Teresa Lubbers, Indiana’s higher education commission, had “vetted” it.

Beyond that, the technical language likely contributed to no one paying much attention. Purdue and Kaplan are described, but never explicitly named. (The law gives Purdue the designation as a “postsecondary state educational institution” and Kaplan as an “SEI affiliated educational institution.”)

The law also refers to Kaplan as a public benefit corporation. In 2016, Indiana became the 28th state to allow public benefit corporations, setting up rules for a form of nonprofit business that can prove it is filling a need for low-income or underserved communities in the arts, the environment, education and more.

The Purdue-Kaplan hybrid will get a new board made up of five Purdue trustees and one from the current Kaplan University Board of Trustees.

That differs from how Purdue deals with its two regional campuses at Purdue Northwest and Purdue Fort Wayne. The trustees oversee those campuses, just as they do the flagship West Lafayette campus.

The trustees are bound by open meetings and public records laws. The new board, according to the law, would be on the hook to show financial and education information to the Commission for Higher Education, when asked.

Schultz said New U trustee meetings likely would be held on the same day and in the same place as Purdue trustees’ meetings. He said the meetings likely would be held the same way committee meetings are held, just prior to the full trustees meetings.

“So, as a practical matter, regular New U trustee meetings will be held in a public setting as if they were subject to the open door law, even though they technically are not under the legislation,” Schultz said.

Are there concerns about the public access exemptions for Purdue’s new online arm?

“Trying to determine the right balance between a public entity and bringing an institution that at least was a publicly traded entity is going to require us to make some modifications to existing rules and regulations,” Hershman said. “The public benefit corporation concept is still fairly new. This may not be the end of it. … I’m still very much in favor of transparency, and I think Mitch is, too.”

“So that means there’s an unaccountable agency that gets to bear the name of a public institution that we won’t really have any visibility into or accountability of,” Baiel said. “Sounds like the name of Purdue – one of the best institutions definitely in the Midwest, if not the country – is associated with a business that you can’t get any insights.

“How can this be considered anything close to a public entity at this point?”